Question

VGarcia Company sells snowboards. Each snowboard requires direct materials of $121, direct labor of $51, variable overhead of $66, and variable selling, general, and administrative costs of $24. The company has fixed overhead costs of $677,000 and fixed selling, general, and administrative costs of $170,000. It expects to produce and sell 12,100 snowboards.

What is the selling price per unit if Garcia uses a markup of 10% of total cost?

Answer 1

The selling price per unit if Garcia uses a markup of 10% of total cost is approximately $349.58.

Step-by-step explanation:

To find the selling price per unit, we need to calculate the total cost per unit and then add a markup of 10% to it.

Total cost per unit = direct materials + direct labor + variable overhead + variable selling, general, and administrative costs + fixed overhead costs / number of units produced

Total cost per unit = $121 + $51 + $66 + $24 + $677,000 / 12,100

Total cost per unit = $121 + $51 + $66 + $24 + $55.95

≈ $317.95

Markup = 10% of total cost per unit = 0.10 * $317.95

≈ $31.79

Selling price per unit = total cost per unit + markup

= $317.79 + $31.79

≈ $349.58